THIS IS STOLEN: The Stolen Rum Story

Banking $21 million from a big US investor after just six years would usually be the end of a successful startup story. But, as Henry Oliver discovers, Stolen's story is just beginning.

Six years ago, I owned a bar called D.O.C. on Karangahape Road in Auckland. One afternoon, a mysterious package arrived: a brown paper bag with the name of a criminal charge typed on the front. Inside was an evidence sheet including my name, a few personal details and a photo of me from Facebook. There was a knife, a rubber glove, a lime, some brown sugar and a small bottle of rum labelled ‘Stolen’.

Later that week, Jamie Duff and Roger Holmes, the founders of Stolen Rum, came in and introduced the rum they were selling by hand, bottle-by-bottle, to bars around Auckland. Their approach was DIY, but the product was the opposite – smooth golden rum in custom-made, long-necked bottles, with impeccable, irreverent graphic design and cunning branding. It carried touchstones of 42 Below, New Zealand’s entrepreneurial wet dream, but was made for a different time. While 42 was born in an age of plenty, of appletinis and Ecstasy, Stolen was a product of recession, still premium, but more suited to ice and lime, and maybe some ginger ale if you felt like it.

In the years since, Stolen has become one of New Zealand’s premier spirit brands, won a shelf-full of international awards, gathered steam in the Australian market and, last November, sold a controlling interest to US-based venture capital fund Liquid Asset Brands for NZ$21 million.

The investment is both the culmination of years of hard work and business as usual for a brand built for the global market. “It's like a reset,” Duff tells me from his apartment in LA, where he’s currently focusing his efforts, after 18 months hauling bottles to bars and boardrooms in New York, Miami, and Chicago. “A re-engagement and refocus on the original vision, which has never changed. It was always to have a brand with global cultural relevance, to take a lifestyle brand approach to alcohol.”

Not selling up

Whatever you call it – a reset, a milestone, an investment, business as usual – just don’t call it a sale.

“All the investment is new money; it goes straight into the business,” says Kyle Melnyk, Stolen’s CEO for New Zealand and Australia, as we sit with co-founder Roger Holmes in the rum-soaked lounge of Stolen HQ in one of Britomart’s last old leaky buildings. “Not a single shareholder sold their shares. LAB have a controlling stake in the global business, but Jamie, Roger, myself and the other hundred or so shareholders haven't sold a single share. For me, that's really important. We carry on things as they've always been done. We're still in this leaky old office and everyone's still fighting as we always have because that money has to go into growing this business, not into anyone's pocket.”

While Holmes is no longer involved in the business directly (he remains an active shareholder), he sees the investment as a validation of the work he, Duff and many others put into the company over the years.

“It's a real collaborative achievement,” he says. “We set it up, but you need so much help and so much more expertise than what we had ourselves, so to seed into these markets and to finally see someone in the US like LAB pick us up was where we hoped things would be. It’s is an amazing feeling.”

Kelvin Soh (L) and Jamie Duff (R)

Disruptive spirit

The biographical elements of the Stolen Origin Story have been well-covered, but if you missed the press around any of the brand’s numerous achievements (double-gold medals, headline grabbing marketing genius, millions in early investment), here’s the short version:

Jamie Duff, a lawyer, and Roger Holmes, an architect, return from the UK in the midst of the Great Recession and struggle to find suitable employment. Duff, who describes himself as “data-driven”, wanted to start a business and had been researching fragrances and rum as potential opportunities. He took the idea to Holmes, and in their shared one-bedroom flat in Mt Eden, the two started a rum brand, sourcing custom-made rum distilled in Trinidad and soon winning medals at the San Francisco World Spirits Competition and the International Wine and Spirits Awards in London.

The more interesting Stolen Origin Story isn’t so much autobiographical, but conceptual. From the beginning, Duff and Holmes, with the help of designer Kelvin Soh and ex-adman/current innovation consultant James Hurman, set out to build a brand that wasn’t tied to any particular place, or even any particular product. A brand that was elastic and borderless. The brand had to be limitless.

“I went to Kelvin with a bunch of ideas about creating a brand that was more akin to a fashion/lifestyle brand, and using that in spirits to create something special, to create a brand that could breed other products across categories,” says Duff. “Rum was the initial idea but we always saw it as something larger that. If we did our job properly, we could breathe life to other spirits categories – a whisky or a tequila, for example – which has never really been done in spirits. Usually the big brands have a more linear model about having a set brand story, which revolves around a person or a distillery and it's set in one place, and in one category. It's a very product-centric approach, where our vision was to have a lifestyle approach that drew heavily on culture, music and fashion.”

While New Zealand has a history of rum drinking (we are, after all, a nation surrounded by water), it has no tradition in quality rum production. But, rather than seeing a lack of heritage or history as a drawback, Duff and Holmes (and Soh and Hurman) saw it as an opportunity to distinguish Stolen from the leading rum brands, to disrupt a category that had seen little change in decades.

No Zealand

For Stolen, a New Zealand brand inspired by music and fashion and made with Trinidadian rum is totally authentic, mirroring the aesthetics and values of the founders and their potential market more than the brands that may have been founded in Havana or Bermuda, but now based in high-rise offices of multinational conglomerates.

“I thought that those brands were actually inauthentic,” says Duff. “It all just sounded like a made-up story. So I thought the fact that Roger and I had no rum making heritage or lineage was an advantage, like a rock'n'roll musician or punk musician just pushing out something and starting to play with it, so I thought we were actually being more authentic.”

“A lot of other rum brands don't really think of time,” says Soh. “They try to be timeless by talking about pirates or some narrative that could’ve been told 50 years ago or tomorrow. But with Stolen, we're always focused on the now and we're always invested in the moment, being responsive and being contextual.”

That responsiveness was something that had been instilled in Soh from his time spent working with 42 Below in its early days. But while Geoff Ross had been an inspiration for Duff and Holmes as entrepreneurs, Soh was quick to advise them against following too closely in 42’s footsteps.

In terms of the brand DNA, Stolen couldn't be further away from 42 Below, which has this very classic brand architecture, always talking about New Zealand, about its geographic location. Stolen is the complete opposite. We don't talk about New Zealand at all. - Kelvin Soh

“In terms of the brand DNA, Stolen couldn't be further away from 42 Below, which has this very classic brand architecture, always talking about New Zealand, about its geographic location,” says Soh. “Stolen is the complete opposite. We don't talk about New Zealand at all. It's a very deliberate gesture on my part. When I'm creating a brand, I always tell my clients or collaborators to try and find the truth in what they're doing. And to wrap a New Zealand story around a rum would have been completely false.”

This lack of geographic indicators has become a key part of the Stolen brand. Other than the company’s address (which is tiny), there’s nothing on the bottles that show it’s from New Zealand. There’s no 'Clean Green New Zealand', no 100% Pure, no mountains, no lakes.

“Somebody in Miami can pick this up and see it's Caribbean Rum, bottled in Auburndale, and they inherit that brand and take it for themselves,” Melnyk says, holding a bottle of the US-marketed Stolen Smoked (‘Stolen Spiced’ in New Zealand and Australia). “That's the beauty of it. It becomes a completely borderless brand, wherever Jamie is selling it, wherever we are, wherever we're taking on. 42, in its day, still had a real strong tie to New Zealand and that perhaps was its ultimate weakness; in Bacardi not knowing how to grow that or deliver that to the world.

“The guys weren't building this to be an anchor in New Zealand selling, y'know, hobbit water to the world. This is a brand that has appropriated the best rum from the Caribbean, instead of having a distillery in Waiheke and then going, 'How are we going to get this stuff to New York?'”

Shaken/stirred

Melnyk joined Stolen as CFO in 2013 after 15 years in advertising. He became aware of Stolen when a group from Colenso BBDO tasted the rum after a recommendation from Hurman, who, at the time, was the agency’s planning director.

“We all fell in love with it,” says Melnyk. “It was just such a crystallising moment for us.”

They all bought shares.

“Rum's a category that's been overdue for a shake-up similar to those you see in other FMCG categories – popcorn, dairy, whatever,” Melnyk says, giving a nod to Holmes’ new venture, Serious Popcorn (see page 16). “Lewis Road is a classic example. Dairy's been unchanged for 20 years for fear of losing market share or revenue, then someone comes in and goes 'Boom!' and you go, 'Why has no-one else done that?'”

Soon after Melnyk joined, Stolen raised $4 million of angel investment, allowing
it to continue its growth in New Zealand and Australia and start testing the US market. Its first break in the States came
not long after.

Social lubricant

Rudy Ruiz, CEO of Southern Wines & Spirits and one of the biggest wigs in the US booze industry, gave Stolen an opportunity to pitch a new product. He loved Stolen but rum sales were flat and he had enough gold and white rums on his books without adding two more from an unknown brand from New Zealand. The one growth opportunity was in spiced rum, but Stolen didn’t have one. So, Duff and Holmes called in Soh and Hurman to hunker down for a three week think tank to develop a new product that would be distinctive enough to impress the man who’d tried everything.

The first breakthrough came from Hurman, who wrote a brief that, instead of dissecting sales percentages and market opportunities, simply discussed a particular moment, a moment of shared reflection, of openness, of conversation. He was aware of the flavours that Duff and Holmes had been playing around with and came up with a concept inspired by the Jim Jarmusch film Coffee and Cigarettes, where the characters just sit around and talk, drinking coffee, smoking cigarettes.

Hurman’s brief led Stolen towards to a tobacco-inspired rum with smokey flavour profile. The team used base rums that they were already working with, and found experts in infusing alcohol to bring in the herbs, spices and smokiness. The smoky rum, that they called Coffee & Cigarettes in honour of the film, ended up so different from other spiced rums that Stolen proudly anointed it “the world’s first smoked rum”.

Holmes, who had always focused on the product side, flew to Trinidad to work with master blenders, had two litres made up, which he funnelled into sample bottles. Soh came up with a label, which they simply glued on the bottles, before shipping them off to one of the most important people in the US liquor market.

“It was just an amazing, short burst of creativity among the group of us,” Duff says. “The process usually takes six months at least, we ended up having six weeks.”

Ruiz was impressed (“He loved it like an adopted child,” says Melnyk) and asked Stolen to meet to, potentially, join the Southern stable. Duff was already in Miami and had been establishing a relationship with Ruiz, so Melnyk flew over for the meeting. They met Ruiz at Southern’s Miami office. After brief niceties, Ruiz called for glasses and ice, and pulled multiple spiced rums off the shelf, asking Duff and Melnyk to turn their chairs around for a blind tasting.

"I know Jamie's got a great palate and he's going to nail all of them,” Melnyk recalls. “But I've just got off the plane. I'm still jetlagged, I'm still intimidated by the situation because I know this a really important moment for all of us. But when I grab the Smoked rum and I get the smell, I'm like [clicks his fingers]. And he just says to the room 'You see! You see!" because he saw my face just change the instant I smelt it. That ‘Ahhhhh...’ It’s like mother’s milk.”

When life gives you legislation …

Ruiz wasn’t alone in his enthusiasm for the new product. Response to the samples had been so good that Stolen decided it would be the focus of its Australian launch. But before it could hit the shelves, Coffee & Cigarettes ran into what, for other brands, might have been a major stumbling block. Australian anti-smoking legislation prohibited the marketing of products with the word ‘cigarettes’. But Soh just took out a pen and scribbled it out.

“That goes to being nimble and responsive,” says Soh. “When we came up to that obstacle, I just thought, ‘Why don't we just cross it out and have it evident on the label?’ And it just stuck. We always try and turn a negative into a positive and work responsively like that.”

Coffee & Cigarettes became Stolen Spiced, and was key to the brand’s major launch into Australia, where it remains Stolen’s bestseller. In the US, it soon hit a similar road block, when, after an initial approval, the label was rejected by the US Alcohol and Tobacco Tax and Trade Bureau. Having been there before, Stolen simply gave the US label the same treatment, except they called it Smoked to further differentiate it to the sweet, vanilla-based spiced rum that crowds the US market.

Intellectual capital

Getting on Southern’s books was a coup for Stolen, but being one of thousands of products in a phonebook-sized catalogue doesn’t move the needle in a market like the US. You can’t fly in, give some bottles to a few cool bars and then fly home. You have to commit. You have to be seen and seen again.

“You have to be there,” says Melnyk. “Being face-to-face is everything, particularly in the booze business."

But to commit to launching in the US, Stolen needed money. The $4 million it raised had funded its New Zealand expansion, the development of Stolen Spiced/Smoked, and its launch in Australia, but wouldn’t last a run at the US, which Duff saw as crucial for the brand’s future.

“It becomes really obvious when you're looking at the business model – the growth, the capital required and the cash flow,” he says. “When you're working with this type of product and you look at the New Zealand and Australian market, it's simply not big enough. The plan really early on was to grow fast and go international and, to do that, you need a certain amount of growth that you're not going to get from New Zealand and Australia. We knew early on that we had to go to a bigger market. I think, in hindsight, we should have come earlier.”

When a high-growth company needs capital, there are more ways than ever to get it. But to break the US, Stolen needed more than just money, they needed connections and experience.

“We had to decide: Do we IPO? Do we crowdfund? Do we do an angel layer in Australia? Do we do an angel layer in the US?” says Melnyk. “Because that $4 million was only going to last us a few years, Jamie felt, and rightly so, that we needed a bigger layer of investment, and it needed to be US-based, and it needed expertise to come with it, not just a cheque. So, for us, an IPO made no sense. It's a mechanism to raise money but it doesn't bring any expertise.”

For the next 12 months, Stolen focused on fundraising, with Duff based in the US and Melnyk in New Zealand.

“It was the hardest 12 months of my life,” Duff says. “I'd take the suitcase to Miami and then New York. It sounds glamorous, but I was holed up in flats and cafes, pitching to investors. And the pressure of wanting to do well by the company, by the team, by the many people that had invested in us – friends, family, acquaintances. And I didn't know anyone in the States, so I was starting from scratch. It was challenging and exhausting. Hugely satisfying in the end, but, I won't lie, it was the most challenging part of my life.”

Marc Bushala (L) and Jamie Duff (R)

A New York minute

While in New York, a friend forwarded Duff a press release about a new liquor-based venture fund called Liquid Asset Brands (LAB), whose CEO and president, Marc Bushala, had recently sold premium bourbon brand Angel's Envy to Bacardi. Duff emailed LAB Stolen’s digital pitch and, two days later, Bushala and Duff were having a drink in New York. Three days later, Melnyk was in Chicago, and a deal was quickly done.

Bushala says LAB’s interest in Stolen was instant and unanimous.

“We had five different partners looking at deals and all of us saw the Stolen proposal and said 'Wow! This has something!’” he says. “That starts from the brand positioning and the label. Jamie and his partners did an excellent job not just finding the right space in that category, because traditionally in the US, the rum space has been a little bit of a sleeper and most brands are somewhat based around a nautical reference, and we think they found a really interesting place to play in a category that is ripe for taking off.

We really loved the edginess of that brand and thought, not only is it exciting for the rum space, but that whole brand voice could really resonate in different categories as well. We loved the entrepreneurial story, we loved Jamie’s passion, his vision, we loved the brand positioning and we loved the product - Marc Bushala

“We really loved the edginess of that brand and thought, not only is it exciting for the rum space, but that whole brand voice could really resonate in different categories as well. We loved the entrepreneurial story, we loved Jamie’s passion, his vision, we loved the brand positioning and we loved the product. At the end of the day, they came up with something that really tastes great and that stands apart from everything else that we know of in that space.”

After three months of due diligence, LAB took a controlling interest in Stolen and Bushala took over as global CEO. For Stolen, the LAB investment brought the in-market experience it lacked.

“You need to know both your own and your company's weak points and for us it was deep, US operational expertise,” says Duff. “Each state differs from one another, not just from a cultural perspective, but from a regulatory perspective and the way the markets are structured. So it was essential to have that expertise at a very high level.”

“And he's done it,” Duff says about Bushala with enthusiasm. “I've learnt to take advice from people who have done it rather than people that theorise about doing it, or would love to do it, or have read about it. So Marc and the team have done it – they’ve done it from scratch, and they've done it in America with a premium bourbon brand at a very high price in a very competitive market. That's everything.”

“If we did an IPO in New Zealand for $20 million, we still go to the States with one or two people and without any of those relationships that stretch decades,” he says. “The guys and girls behind LAB, collectively around the table, there's a hundred years of booze experience there. They’re worth three times that amount to us.”

Now, with investment and institutional knowledge to take on the US, the challenge for Stolen is to grow as a company while maintaining the flexibility and responsiveness that have got it to where it is today.

“We’re trying to set a tone and vision so everyone understands the brand inherently,” says Duff. “And when it's a lifestyle brand, there's not this linear model of ‘We were distillers 100 years ago and then we built this plant’. For me, it's more philosophical and that can be hard for people to get their head around because it's subjective, often influenced by how you see yourself in the world. We've lived it for six years and the new additions to the team are massively experienced in spirits in the US but not with Stolen, and it takes time to live with it. For us, it's second-nature.”

Shelf life

But Stolen is also still figuring out where that growth will take them. Bushala says the plan is to expand into eight new markets in the States this year, working towards a new, more premium rum (perhaps overproof, or Cuban). And, beyond that, you may see a Stolen whisky on the shelves.

“We feel that the Stolen brand is strong enough so that each one will have slightly its own personality which will revolve around the kind of liquid it is. The product credentials will be different, but the way it behaves – in terms of cultural influence – all those things will remain very consistent.”

And from there … anything. In Stolen’s investment memos, it had little bottles of Stolen-branded tequila and cologne.

“This master brand architecture might be a pair of sneakers one day,” Melnyk says. “We're still just fighting for every next move. When you're going from one fund raising to the next, and buying one-way tickets to places, your vision is very short and the horizon is close. But now, we're looking a bit further, which is nice. It's nice to think this might just work.”